Tax income to pay Cowboys Stadium debt is beating projections

Arlington voters agreed in fall 2004 to help fund Cowboys
Stadium by enacting new taxes. More than 5 ½ years, a full
NFL season and one global recession later, numbers are now
available to start judging how well financial projections compare
to reality.

It turns out the amount of tax revenue is far better than
originally predicted for 2010. Arlington owes $20.4 million in bond
payments this year but is on track to generate more than $27
million from taxes dedicated to that debt.

If the city's conservative projections hold true, the bonds
could be paid off years early, much like the ones were for Rangers
Ballpark in Arlington.

An economist who has researched Cowboys Stadium previously and a
finance professor with expertise in municipal bonds looked at the
city's numbers and said there appears to be little danger that
Arlington couldn't meet its obligations. They also said there's a
good chance the city could pay the bonds off years early.

Arlington Mayor Robert Cluck said the bond performance has been
particularly impressive considering the overall economy. During the
previous economic downturn, Arlington's sales tax revenue
plummeted, but not this time.

"I thought it was going to be tighter than we projected," Cluck
said about the Cowboys Stadium bonds. "Any time you get into a deep
recession like this, there is cause for concern."

The city's deal to spend $325 million to help pay for the $1.2
billion stadium was made a few years before the nation slid into
what's described as the worst economic downturn since the Great
Depression.

Cluck said his biggest scare came in 2008 when the council was
forced to refinance some bonds that didn't have a traditional fixed
rate. That cost Arlington millions more to sort out.

The bulk of the money comes from sales taxes, which are
notoriously volatile. Many North Texas cities reported serious
declines in their sales tax revenue in the past couple of years.
Compared with other large cities, Arlington has had smaller drops
in sales taxes for some months and even reported increases for
other months.

A second group of bonds - nearly $147 million - issued to help
finance a portion of the Cowboys' debt is also faring well, maybe
even better than the city's share.

Those bonds would be paid by the Cowboys if the ticket and
parking taxes, which the city has referred to as user taxes, were
inadequate to make debt payments. But for the stadium's first year
open, those taxes raised about $15.2 million compared with the $9.3
million originally projected.

This year, the city's stadium taxes are expected to generate
one-third more than what is needed to pay the debt service.
Arlington's official assumptions are that the revenue won't change
much during the next few decades.

"We've dealt with the economy and have still been in that $25
million range," said deputy city manager Trey Yelverton. "If we
just held flat, we would have the coverage we would need."

'A little sketchy'

The current amount of money generated by those taxes is
sufficient to make the annual bond payments, even when those
escalate to nearly $26 million. The payments fluctuate throughout
the years and even drop as low as $3.2 million in 2029 and
2030.

John Vrooman, a Vanderbilt University professor who studies
sports economics, agreed to look over the city's bond figures for
The Dallas Morning News. He said in an e-mail that the ratio of
debt to revenue initially looks "a little sketchy," particularly
for a decade beginning with 2018. But he wrote in his analysis that
the $20.5 million reserve fund plus overages that accumulate in the
early years will help offset that.

"It is also important to remember that this is the same tax base
that retired Rangers stadium debt early," Vrooman wrote.

The city's $135 million bond package for Rangers Ballpark was
paid off in 10 years instead of the projected 20 years.

Vrooman said Arlington residents should feel "relatively safe"
about the financial health of the bonds, although he's not a fan of
many stadium deals. Although the cost split between the city and
Cowboys is better than many stadium financing deals, he said that
"does not serve to justify the use of public money for private
Dallas Cowboys gain."

Kenneth Daniels, a finance professor at Virginia Commonwealth
University in Richmond who researches municipal bonds, wrote in an
e-mail that the flat revenue projections from the city were
"atypical" and probably unusually conservative because the debt
required voter approval.

He also said the debt-to-revenue ratio is a little thin between
2018 and 2027, but the size of the reserve fund "seems
reasonable."

"A lot of deals would probably be more aggressive and would
project revenues growing over the time," Yelverton said.

Good for everyone

There are essentially two sets of bonds. One group is the city's
responsibility and paid with the sales, hotel-motel and car rental
taxes.

The second set is paid with a $3 per vehicle stadium parking tax
and a 10 percent ticket tax. Those count toward the Cowboys' share
of the project. The benefit of this approach for the Cowboys -
instead of simply increasing ticket prices by the same amount as
the tax - is that it's not subject to league revenue sharing.

Vrooman said the Cowboys don't appear to face a big risk from
the bonds paid with ticket and parking taxes. He wrote that the
coverage rate - revenue compared to payment - of 2-to-1 is
"relatively safe."

The prediction of how much those taxes would raise turned out to
be low in part because the city underestimated how much tickets
would cost, the numbers of seats in the stadium and the number of
events held there.

Cluck said he knew the stadium would be busy year around but
didn't expect this level of activity. And that not only helped the
Cowboys with their bonds but boosted the city's sales taxes too, he
said.

"I hope we continue to thrive, and the way to do that is to keep
that stadium door unlocked," Cluck said. "That's good for the
Cowboys, and that's good for us." TAX MONEY

Here are some numbers that demonstrate why Cowboys Stadium is
generating more ticket tax money than its bond projections
originally estimated:

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